The Decision to Not Make a Decision

The decision to not make a decision can be a great decision. The markets have been quite volatile this year. At times this means the markets go up, and at other times it goes down. When the market is going up, it feels good, and we feel inclined to invest more aggressively. When the market is going down, it’s uncomfortable, and we want to sell. If these emotions are followed, then it would cause an investor to buy high and sell low. This is the exact opposite of successful investing.

This brings us to one of the hardest things to do as an investor. Nothing. Nothing at all. Timing markets, trying to decide when to jump in and out is extremely difficult and has proven to be a long-term strategy. Let’s not confuse luck and skill when someone claims to have done it successfully. However, if you don’t react to emotion, the markets have historically rebounded. Sometimes it takes a couple weeks, other times it can drag on for months. This is when it is hardest to do nothing, but it is often the right thing to do.

If you are invested in mutual funds or ETF’s, as most investors are, your fund maybe earning you interest or paying dividends. Even when it feels like the markets are underperforming, they are still paying these earnings out. Another way to look at it - regardless of the current value of your investment, you could still be making money through dividend distributions. Typically, dividends and interest payments are automatically reinvested. So, when markets are down, you’re then buying more shares when they are less expensive and buying more shares when they are less expensive. When times are good your dividends are reinvested at a higher price, and there is a chance the markets will continue to rise. No skill or luck is required.

So, sit back and enjoy the ride. Keep your money in the market and reinvest your earnings. Remember, the decision to not make a decision can be a great decision.

Happy Investing!

Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.